Christopher M. Winter – Duane Morris Delaware Business Law

April 11, 2023April 11, 2023 by Rebecca A. Guzman

Do New Delaware General Corporation Law Exculpation Amendments Trigger a Mandatory Class Vote for Changes to Charters?

In August 2022, a number of amendments to the provisions of the Delaware General Corporation Law (DGCL) went into effect. One amendment of note is the extension of Section 102(b)(7)’s exculpation provisions, which now permit corporations to eliminate or limit the personal liability of specified officers for direct claims of breach of the fiduciary duty of care. As a result, several Delaware corporations have amended their charters to extend the Section 102(b)(7) clauses to those senior corporate officers specified under the newly amended statute. Naturally, these actions bring a new issue for the courts to determine: What is the requisite stockholder approval to implement these charter amendments?

To read the full Alert, visit the firm website

November 18, 2014December 19, 2014 by Christopher M. Winter

How Immediate is “Prompt” in a Contract? New Delaware Supreme Court Justice Vaughn Finds that It Depends

What does the term “prompt” mean in a contract? Well, it depends, according to Judge James T. Vaughn Jr., who was recently confirmed to the Delaware Supreme Court. In an opinion issued last week from his prior post in the Superior Court (Complex Commercial Division), Justice Vaughn found that notice after ten months may in some circumstances constitute “prompt notice.”

In Avaya, Inc. v. Charter Communications Holding Company, LLC, C.A. No. N14C-03-052, Plaintiff Avaya, Inc. (“Avaya”) moved for summary judgment, arguing that defendants Charter Communications Holding Company, LLC and Charter Communications, Inc. (together “Charter”) failed to satisfy a contractual indemnity requirement to “promptly notify” Avaya of a claim or suit for which indemnity was requested. Charter was served with the complaint at issue on September 5, 2006. However, Charter did not provide a copy of that complaint and tender its defense to Avaya until approximately ten months later on July 2, 2007.

Justice Vaughn denied Avaya’s summary judgment motion, declining to find that notice given ten months after the filing of a lawsuit was, as a matter of law, not prompt. Instead, the Court found that Charter should have the opportunity to conduct discovery to develop the “attendant facts and circumstance.”

Avaya and Charter were party to a Master Purchase Service Agreement (“Agreement”) pursuant to which Charter purchased certain equipment and software from Avaya, including a “private branch exchange system,” an “automatic call distribution system,” and customer management software.

Under the Agreement, Avaya was required to “defend, or settle, at its own expense”, and “pay all damages and costs” relating to, any claims for infringement of patent, copyright or trade secret brought against Charter related to Charter’s use of Avaya products purchased under the Agreement. However, the Agreement also provided, among other things, that “Avaya’s obligation is expressly conditioned upon the following: (1) [Charter] shall promptly notify Avaya in writing of such claim or suit…” The Agreement further provided that if any Avaya product is, or is likely to become, the subject of an infringement lawsuit, that Avaya would procure sufficient rights for Charter to continue using the product without infringement, or would provide a sufficient replacement product or a refund.

On September 1, 2006, Ronald A. Katz Technology Licensing, L.P., sued Charter in the United States District Court for the District of Delaware (the “Infringement Suit”), alleging that Charter’s “call process systems” and “telephone bill pay services” (among other things) infringed Katz’s patents. Charter was served with the complaint on September 5, 2006 and Charter gave notice ten months later.

Avaya initially rejected the indemnification request on grounds that the Infringement Suit did not specifically allege infringement by an Avaya product. Avaya did not initially raise lack of “prompt notice.” On March 16, 2014, Avaya filed the declaratory judgment action in the Delaware Superior Court seeking a determination that “prompt notice” was not given and that Avaya had no duty to defend and indemnify Charter in the Infringement Suit.

Avaya argued that providing notice in 10 months is not “prompt notice” as a matter of law, and that there are no mitigating factors here that would excuse Charter’s delay. Judge Vaughn rejected the argument. “I am not persuaded that the fact alone of a ten month period between the commencement of the Katz Lawsuit and the giving of the July 2, 2007 notice constitutes lack of prompt notice as a matter of law. I agree with Charter that the phrase is subject to some interpretation, and that the interpretation may be influenced by attendant facts and circumstances.”

The Agreement was governed by New York law, and while there was no caselaw discussion, Justice Vaughn did cite to one case in a footnote: Am. Transtech Inc. V. U.S. Trust Corp., 933 F. Supp. 1193, 1200 (S.D.N.Y. 1996). The court in Transtech found that “prompt notice” in an indemnification provision meant notice that gives the indemnitor sufficient time to participate in the defense and that a determination of “sufficient time” required consideration of all of the circumstances.

November 7, 2014November 7, 2014 by Christopher M. Winter

Delaware Supreme Court Finds Secured Lender’s Subjective Intent Irrelevant to Effect of UCC Termination Statement

The subjective intent of a secured lender is not relevant to a determination of whether a termination statement was effective under the Delaware Uniform Commercial Code (“UCC”) to terminate the secured lender’s perfected security interest, the Delaware Supreme Court has ruled.

The Delaware Supreme Court considered the issue as a question certified to it by the US Court of Appeals for the Second Circuit in In re: Motors Liquidation Company, 755 F.3d 78, 86 (2d Cir. 2014). The opinion serves as a reminder (and cautionary tale) for agents, lenders and their counsel to closely scrutinize not only transaction documents, but also financing statements and termination statements being filed as part of a closing. Continue reading “Delaware Supreme Court Finds Secured Lender’s Subjective Intent Irrelevant to Effect of UCC Termination Statement”

June 26, 2014August 25, 2014 by Christopher M. Winter

Delaware Fee-Shifting Bill Shelved For 2014

A joint resolution of the Delaware State Senate and House of Representatives, with the approval of Governor Markell, has shelved a bill to ban Delaware stock corporations from adopting bylaw provisions to shift attorneys’ fees and expenses in corporate litigation to unsuccessful plaintiffs.

The bill was drafted and approved by the Delaware State Bar Association and presented to the General Assembly following the May 8, 2014, en banc response of the Delaware Supreme Court to certified questions of law from the U.S. District Court for the District of Delaware in ATP Tour, Inc. v. Deutscher Tennis Bund (German Tennis Federation), et al., No. 534, 2013 (Del. May 8, 2014). The Supreme Court stated in ATP that a “fee shifting” bylaw provision in a non-stock corporation’s bylaws “can be valid and enforceable under Delaware law.” The bylaw at issue would shift the company’s defense fees and costs to a member who had sued the company (or any other member) and was unsuccessful in “substantially achiev[ing], in substance and amount, the full remedy sought” in the litigation.

Continue reading “Delaware Fee-Shifting Bill Shelved For 2014”

May 19, 2014August 25, 2014 by Christopher M. Winter

Proposed Amendment to Delaware Statute of Limitations Would Extend Time for Contract Claims to 20 Years (Without Seal)Proposed Amendment to Delaware Statute of Limitations Would Extend Time for Contract Claims to 20 Years (Without Seal)

A proposed amendment to the Delaware statute of limitations for contract claims should go a long way toward eliminating uncertainty in parties’ attempts to extend limitations periods by written agreement or by entering into contracts under seal. Parties generally cannot extend (or waive) a statutory limitations periods by agreement, and the requisite formalities required to enter into contracts under seal can be easily botched due to a lack of guidance and inconsistent caselaw. The amendment would allow parties to extend the limitations period in writing to up to 20 years and would only apply to contracts involving at least $100,000.

Continue reading “Proposed Amendment to Delaware Statute of Limitations Would Extend Time for Contract Claims to 20 Years (Without Seal)Proposed Amendment to Delaware Statute of Limitations Would Extend Time for Contract Claims to 20 Years (Without Seal)”